After decades of market distortion due to the Large Scale Retail Store Law (LSRSL) and its restriction on large retail spaces at city center, the GOJ (Government of Japan) is proposing a solution — a new City Planning Law, with new restrictive legislation that would propose to correct the distortions caused by the LSRSL by creating new restrictions on the creation of big box retail in the suburbs. This will create further distortions. The right approach is to scrap the LSRSL.
In fact the proposed City Planning Law will adversely affect all retailers over the long term. This law, as with the original LSRSL, increases our business partners’ economic transaction costs (i.e. costs of doing business) with no real societal benefit. We are strongly against any legislation restricting retail development of any size, whether it be in suburban areas, as per the new law, or downtown urban areas, as per the original LSRSL.
Were the GOJ serious about correcting market imbalances, they would not introduce new legislation, but overturn the original LSRSL. There is no risk of large scale commercial instability at the city center as natural market conditions (i.e. unavailability of land) provides a natural protection to the smaller mom and pop and specialty operators. To repeat, there is no need for either a new law controlling suburban rollout, or for the original LSRSL.
Our story thus far:
Years ago LDP/GOJ made determination to protect mom and pop stores, initiating LSRSL. This drove retailers to seek efficiencies in commerce-friendly areas, namely suburban areas looking for the tax and other economic benefits derived from the commercial activity.
Now the GOJ has discovered that consumers have left city centers to shop at the more convenient, less expensive suburban centers anyway. They pretend to be shocked! shocked! at this development, even as they commute to Kasumigaseki from places like Tsukuba, where their quality of life is directly and positively impacted by the fact that their wives have their choice of stores from Shimamura to Ito Yokado to Right On. Before they are allowed to monkey with further market interventions, they and their wives should all be forced to shop for all their needs only at the old station-front “shotengai” for a period of one year. If at the end of that year they think national quality of life was improved by the original LSRSL, they can proceed with the second wrong of restricting suburban retail development. These two wrongs, however, will not make things right. LSRSL and a new restriction on suburban development will only create additional distortions, not correct the original one.
The only right move is the abolition of the LSRSL. If the LSRSL is abolished, good retailers will find city centers a la Tesco Metro on their own, with no help from the government in the form of yet another law.
GOJ should focus on postal reform, public works reform, and yes, even a good, centralized city planning system with balanced incentives and environmental impact reviews for both urban and suburban development. Beyond this, the market will take care of whether there are too few or too many large boxes, whether it be in urban centers or the suburbs.